The color of money - Bad credit, wealth, and race

This article examines the myth of bad credit in the Black, community. Histo rically, Blacks have had higher savings rates and lower use of credit than Whites. Discrimination in lending led to an aversion to credit. Later, Blac ks believed their credit to be bad, even among many better qualified Black, loan applicants. The authors find that there is no statistically significa nt difference in the average level of "bad credit " among Blacks and Whites who have been turned down for loans or who have not applied for loans, as seen in national data sets measuring wealth and expenditures, Contrary to c onventional wisdom, no statistically significant difference exists in bad c redit rates between Black and White households at the lowest and highest we alth levels. The authors contend that the observed differences in the bad c redit rates between Blacks and Whites in the middle wealth range are attrib utable to different treatment of Blacks and Whites in credit markets.